Jane Embury, director of advanced glazing company Wrightstyle, looks at provisions in the Budget for the construction industry.
This week saw Chancellor Rishi Sunak announcing the government’s latest budget.
In it were several fiscal and other announcements that will have an impact on the construction industry.
Taken together, the objective is to kick-start a sector that, with the exception of housebuilding, has stalled.
The reason for that is a reluctance to commit to new projects without knowing what the future will look like. For example, will home working dent the need for new offices?
It’s that lack of confidence that the Budget set out to address, despite the government already pouring out huge sums of cash.
Indeed, government support to business from last year through to 2022 will amount to £407 billion. That takes government borrowing to 17% of GDP.
The better news is that the economy is likely to prove more resilient than some feared. The Office for Budget Responsibility (OBR) estimates that the UK economy will grow by 4% this year. This should rise to 7.3% in 2022.
Among one of the Chancellor’s key fiscal announcements was that corporation tax will rise to 25%. However, the increase won’t come into effect until April 2023.
That will allow companies to recover from the economic effects of Covid-19. Ccompanies making a profit of £50,000 or less will continue to pay the 19% rate.
Anything above £50,000 and the rate will be variable, with only those companies making in excess of £250,000 in profit paying the full 25%.
Helping investment, there is to be a “super deduction” scheme running between 1 April 2021 and 31 March 2023.
This allows companies to invest in plant and machinery and obtain a 130% first-year capital allowance.
The Chancellor said that “under the existing rules a construction firm buying £10m of new equipment can reduce their taxable income in the year they invest by just £2.6m. With the super deduction they can reduce it by £13m.”
In the shorter-term, the government is extending the furlough and Self-Employment Income Support Scheme (SEISS) until September. Employer contributions will increase from 10% of salaries in July to 20% in August and September.
For house builders, a £10m Modern Methods of Construction (MMC) taskforce has been created to promote the use of MMC in housebuilding.
Enabling borrowing, some companies will be able to access Covid-19 recovery loans of up to £10 million, with government guaranteeing 80%.
Other measures include a ‘Help to Grow’ scheme offering SMEs access to management training, with the government paying for 90% of the cost.
Lastly, there will be a UK Infrastructure Bank with up to £12 billion in funds to stimulate green initiatives across the country.
The government recognises the importance of the construction sector to the overall health of the economy.
It’s hoping that the new measures and investment promises will be enough to unblock building programmes that have stalled during Covid-19.
There are some signs this may be happening already, with project starts increasing. Indeed, overall, UK construction companies experienced a return to growth in February.
The IHS Markit/CIPS UK Construction Total Activity Index posted 53.3 in February, up from 49.2 in January, driven by commercial work. 50 indicates no change.
But will the Budget be enough to create additional confidence in the sector, and stimulate the growth that the sector badly needs? We’ll have to wait and see.